A new deal

30/12/2005

We got off the train at Abu Road station in Rajasthan to visit two cement plants located in the nearby district of Sirohi. The drive was predictable - dry stretches interspersed with marginal agriculture and signs of livestock grazing. But I was keenly waiting for signs of the trees covered with white dust that would signal our arrival to the cement factory. Cement, after all, is known to be incredibly polluting with its emissions and dust from raw materials smothering nearby inhabitants. The industry mines limestone for its product, devastating the environment, and destroying land and water bodies.

When we got to the factory, the sight before us was considerably different. The evidently modern plant was relatively dust-free; raw material - from limestone to coal - was covered to minimise dust emissions and the emissions from its stacks were under specified standard. Even though all mining hurts because it cuts through the land and smashes hills into pieces of nothing, here the factory management was minimising damage with precision blasting and careful mining.

It was as environmentally-friendly as one can get in a place that manufactures 'white gold' dust, using rocks, which are ground and burnt at tremendous temperatures, burning huge amounts of energy in the process. My colleagues from the Green Rating Project (grp), who have rated this industry, estimate that making one tonne of cement takes roughly 150 kg of coal and 150 kilowatt-hour of power. The good news is that the Indian cement industry has worked overtime to ensure that it brings down its energy costs, which constitute its single largest expenditure - as much as 25 per cent of the turnover. This industry is more energy-efficient than competitors in the us and Germany. In other words, it generates less greenhouse gases per unit of output than its rich counterparts.

But the downside is that its efficiency has come at the cost of labour as plants have automated themselves intensively. The over 2.5-million-tonne-a-year plant we visited, employed less than 670 people (including contract and daily wage workers). It mined over 15,000 tonnes each day, with less than 40 people. The only 'human' job involved transporting the mined material to the crusher. The factory had innovated ingeniously, fitting the tiny cabins of its transporter trucks with air conditioners, so that drivers would not need to 'cool' off between jobs. No wonder, grp calculated that the Indian cement industry employs 590 people to manufacture 1 million tonnes. Labour costs of this industry are the smallest component of its total turnover, at roughly 3.6 per cent.

Industry will tell you this is inevitable. In fact, it needs to do even more to 'rightsize'. Japan, for instance, employs just 53 people to manufacture 1 million tonnes of cement. This industry's competitive advantage is built on its ability to control its variable costs - of labour and of raw material.

This is not unusual. It is clear that across the country (and across the industrial world), growth comes at the cost of jobs. The last National Sample Survey estimation revealed that not only had employment-generation per unit of output declined in the country by three times in between 1999 and 2000, but the contribution of the organised sector to employment had remained at 8 per cent. The private sector's contribution was a meagre 2.5 per cent. Given these trends, the Planning Commission had said that even if the private sector grew at 30 per cent, its contribution to total employment would increase by 1.5 to 2 per cent over the 10 th Plan. Now the plan's mid-term review says employment in the organised sector has gone down over the last three years.

The cement industry is not unusual, but the poverty and economic backwardness of areas in which modern plants are located is. This is the question that needs to be addressed. The fact is that today every politician sells the dream of industrial development to their electorate, with the promise of jobs and growth. But clearly, modern industrial growth requires resources of the region - minerals, water or energy. It does not require people.

In other words, it does not necessarily provide local benefits. If it provides employment benefits, it is outside the poor region in which it is based. For instance, cement is used in the construction of houses, infrastructure and industrial projects. The employment in the construction industry has increased by 7 per cent in 1999-2000 over the past decade. Employment benefits are not provided where plants are located, but where there is opportunity and growth. Local economic growth is thus not about industry per se but about the ability of governments to invest in the advancement of traditional labour-intensive sectors - from agriculture to forestry. But this is not possible, unless we reinvest in areas from where resources are extracted.

In other words, inclusive growth will require ways to value local resources - be it water, minerals or energy - so that it gives back more than it takes. For instance, limestone (its raw material) costs add up to less than four per cent of the turnover of this industry. The industry degrades the land, uses local water, but does little to return back wealth. Worse, the royalty on minerals goes to state exchequers, not to local communities. This will have to change.

It is this new deal - between industry and people - that will bring true growth. It is this new deal that will bring true environmental benefits - not greening the factory, but greening the region and the people in which the factory is based. A green deal for the future.